‘It’s challenging’: Sydney house prices hit record high of $1.69m

Sydney house prices hit a record high in the March quarter as hope for interest rate cuts boosted buyers’ confidence, but the price gains have left many first home hopefuls locked out.

Sydney’s median house price rose $28,200 or 1.7 per cent in the three months to March to hit a record $1.692 million, Domain’s latest House Price Report, released on Thursday, showed.

Still, annual gains have lost momentum, with Sydney house prices dropping to their lowest growth rate in almost two years at 4 per cent ($65,200) amid ongoing affordability issues. By comparison, seasonally adjusted wages growth sat at 3.2 per cent in the December quarter, an issue raised in the election run-up this week.

Dr Nicola Powell, Domain chief of research and economics, said after some house market weakness in 2024, the data indicated that the market had “turned a bit of a corner.”

“We have got continuous growth, and even with house prices, where we saw a little bit of weakness during 2024, where we did see house prices drop marginally. What we’ve got now are two back-to- back quarters of growth for house prices,” she said.

Units also recorded growth for the March quarter. The median price increased by $2900 (0.4 per cent), to hit a record high of $823,467. This represented the third consecutive quarterly gain, Domain said.

The slowdown in the market last year, alongside an interest rate cut, may have prompted people to get into the market, said PRD Real Estate chief economist Diaswati Mardiasmo.

“Historically speaking, if there is a cash rate cut, then many people will want to get into the market to take advantage of it, which causes prices to go up,” she said.

The Reserve Bank in February cut interest rates to 4.1 per cent, the first cut in four years after 13 hikes.

Anthony Landahl, managing director at mortgage broker Equilibria Finance, said in a general sense he had seen an uptick in inquiries, levels of pre-approvals, as well as people purchasing over the past six to eight weeks.

“There’s definitely been an uplift, and we put that down to, not only the original interest rate cut, but also the fact that people are seeing potentially more rate cuts coming on the horizon, and want to understand what they can do,” he said.

James Young, 37, and his wife Amber Young, 34, bought a home in South Turramurra in March. They began looking in September last year after they returned from living in London with their two sons, aged one and three.

In response to Sydney’s competitive property market and rising prices, the couple also decided to work with a buyer’s agent after finding numerous properties were being sold off market.

“So, we kind of expanded our search a little bit,” Young, a lawyer, said. “That was quite helpful … to kind of think about what we could get for our money in other areas.”

Couple James and Amber Young expanded their search area in response to Sydney’s competitive property market,Credit: Wolter Peeters

The potential for interest rate cut impact was something they contemplated as they were house hunting.

“Knowing that, with an interest rate cut there might be more people trying to get into the market,” he said. “I think that was encouraging us to move as quickly as we could.”

During the March quarter, house prices rose in all but two greater Sydney regions. Parramatta fell 1.5 per cent and the Central Coast was flat. The inner west had the biggest rise (up 7.2 per cent), Ryde (up 4.5 per cent), the inner south-west (up 3.8 per cent) and North Sydney and Hornsby (up 3.6 per cent).

BresicWhitney chief executive Thomas McGlynn said interest in the inner west was a recognition of the area’s value, noting its access to parks, infrastructure, schools and dining options.

“You’ve got people traversing from areas like the eastern suburbs and the lower north shore into the inner west because of that value that is there,” he said.

“That sometimes means they are coming with bigger budgets, and they’re willing to spend it on homes that provide that lifestyle.”

Despite annual gains for both units and houses losing momentum, affordability remains a barrier with new buyers still battling to get into Sydney’s property market.

“It’s still challenging, I think, with first home buyers,” Domain’s Powell said, adding that relocation out of Sydney was a key trend for potential homeowners.

Equilibria Finance’s Landahl said he was also still seeing affordability and deposit challenges, with new buyers considering a shift to investment properties instead.

“We are getting some first home buyers looking at buying an investment as their first property in an area that they see as a good investment, that might be more affordable,” he said.

“And accepting that they’ll be out of the market for the foreseeable future and continue renting where they want to live,” he said.